Question 1

The tendency of the prices of identical baskets of goods across countries to converge:

Accepted Answer

A) ​Is weaker to the extent the countries compared have substantial tariffs on imported goods. 
B) ​Is weaker to the extent the countries compared have limiting quotas on imported goods. 
C) ​Is weaker for goods and services not traded internationally. 
D) ​All of the above are true. 
A) ​Is weaker to the extent the countries compared have substantial tariffs on imported goods. 
B) ​Is weaker to the extent the countries compared have limiting quotas on imported goods. 
C) ​Is weaker for goods and services not traded internationally. 
D) ​All of the above are true. D

Question 2

In recent years the United States has run persistent deficits in its balance on the current account.

Accepted Answer

A) True 
 B)False  True

Question 3

Which of the following would occur as a result if Europe experienced a lower inflation rate than the U.S.?

Accepted Answer

A) ​European products would become more expensive to U.S.consumers. 
B) ​It would decrease the quantity of European goods demanded by Americans. 
C) ​It would decrease the demand for Euros. 
D) ​None of the above would occur. 
A) ​European products would become more expensive to U.S.consumers. 
B) ​It would decrease the quantity of European goods demanded by Americans. 
C) ​It would decrease the demand for Euros. 
D) ​None of the above would occur. D

Question 4

Sweden's currency would tend to depreciate if:

Accepted Answer

A) ​Sweden's inflation rate rises relative to inflation in the rest of the world. 
B) ​the demand for imports by Swedes increases. 
C) ​real interest rates in Sweden decrease relative to the rest of the world. 
D) ​all of the above 
A) ​Sweden's inflation rate rises relative to inflation in the rest of the world. 
B) ​the demand for imports by Swedes increases. 
C) ​real interest rates in Sweden decrease relative to the rest of the world. 
D) ​all of the above

Question 5

Deficits and surpluses in the balance of payments are eliminated by ____ in a pure flexible exchange rate system.

Accepted Answer

A) ​the market mechanism 
B) ​financial borrowings 
C) ​reserve movements 
D) ​changes in fiscal and monetary policies 
A) ​the market mechanism 
B) ​financial borrowings 
C) ​reserve movements 
D) ​changes in fiscal and monetary policies

Question 6

What will happen to a country that fixes the price of foreign exchange below equilibrium?

Accepted Answer

If foreign exchange is priced below equi

Question 7

U.S. imports are considered:

Accepted Answer

A) ​a credit or plus item in the U.S.balance of payments. 
B) ​a credit or minus item in the U.S.balance of payments. 
C) ​a debit or plus item in the U.S.balance of payments. 
D) ​a debit or minus item in the U.S.balance of payments. 
A) ​a credit or plus item in the U.S.balance of payments. 
B) ​a credit or minus item in the U.S.balance of payments. 
C) ​a debit or plus item in the U.S.balance of payments. 
D) ​a debit or minus item in the U.S.balance of payments.

Question 8

Suppose a video craze in the United States makes a particular Japanese-produced video game very popular. This would tend to:

Accepted Answer

A) ​affect the U.S.balance of payments but not the balance of trade. 
B) ​reduce any existing balance of trade deficit in the United States. 
C) ​increase the balance of trade deficit of the United States. 
D) ​increase the balance of trade surplus of the United States. 
A) ​affect the U.S.balance of payments but not the balance of trade. 
B) ​reduce any existing balance of trade deficit in the United States. 
C) ​increase the balance of trade deficit of the United States. 
D) ​increase the balance of trade surplus of the United States.

Question 9

The difference between the value of a country's merchandise exports and merchandise imports is known as the balance:

Accepted Answer

A) ​of payments. 
B) ​of trade. 
C) ​on current account. 
D) ​on capital account. 
A) ​of payments. 
B) ​of trade. 
C) ​on current account. 
D) ​on capital account.

Question 10

A decrease in foreign demand for U.S. exports will ____ the demand for U.S. dollars and cause the U.S. dollar to ____ in value.

Accepted Answer

A) ​increase; appreciate 
B) ​increase; depreciate 
C) ​decrease; appreciate 
D) ​decrease; depreciate 
A) ​increase; appreciate 
B) ​increase; depreciate 
C) ​decrease; appreciate 
D) ​decrease; depreciate

Question 11

Suppose that the dollar value rises from 100 to 125 yen. As a result,

Accepted Answer

A) ​exports to Japan will likely increase. 
B) ​Japanese tourists will more likely visit the United States. 
C) ​U.S.businesses will be less likely to use Japanese shipping lines to transport their products. 
D) ​U.S.consumers will more likely buy Japanese-made automobiles. 
A) ​exports to Japan will likely increase. 
B) ​Japanese tourists will more likely visit the United States. 
C) ​U.S.businesses will be less likely to use Japanese shipping lines to transport their products. 
D) ​U.S.consumers will more likely buy Japanese-made automobiles.

Question 12

An exchange rate is the price of one currency in terms of a second currency.

Accepted Answer

A) True 
 B)False

Question 13

If the United States exports military hardware, what is the effect in the exchange market?

Accepted Answer

A) ​It will increase the supply of U.S.dollars. 
B) ​It will decrease the supply of U.S.dollars. 
C) ​It will increase the demand for U.S.dollars. 
D) ​It will decrease the demand for U.S.dollars. 
A) ​It will increase the supply of U.S.dollars. 
B) ​It will decrease the supply of U.S.dollars. 
C) ​It will increase the demand for U.S.dollars. 
D) ​It will decrease the demand for U.S.dollars.

Question 14

Which of the following would increase the demand for U.S. dollars in the foreign exchange market?

Accepted Answer

A) ​the spending of U.S.tourists in France 
B) ​the purchase of Japanese automobiles by American consumers 
C) ​the sale of U.S.computer equipment to a Canadian buyer 
D) ​the purchase of a Mexican shoe factory by a U.S.investor 
A) ​the spending of U.S.tourists in France 
B) ​the purchase of Japanese automobiles by American consumers 
C) ​the sale of U.S.computer equipment to a Canadian buyer 
D) ​the purchase of a Mexican shoe factory by a U.S.investor

Question 15

It has become largely accepted since the end of the Bretton Woods agreement that:

Accepted Answer

A) ​the gold standard was superior to anything that has come along since. 
B) ​governments have no role whatsoever in determining exchange rates. 
C) ​it is not necessary for governments to fix exchange rates for long periods of time. 
D) ​floating rates simply have not worked. 
A) ​the gold standard was superior to anything that has come along since. 
B) ​governments have no role whatsoever in determining exchange rates. 
C) ​it is not necessary for governments to fix exchange rates for long periods of time. 
D) ​floating rates simply have not worked.

Question 16

If European incomes rose, European tariffs on U.S. goods decreased, or their tastes for American goods increased, Europeans would demand ____ U.S. goods, leading them to ____ their supply of euros to obtain the added dollars necessary to make those purchases.

Accepted Answer

A) ​more; increase. 
B) ​more; decrease. 
C) ​fewer; increase. 
D) ​fewer; decrease. 
A) ​more; increase. 
B) ​more; decrease. 
C) ​fewer; increase. 
D) ​fewer; decrease.

Question 17

Reduced U.S. tastes for European goods would ____ the supply of euros and ____ the demand for euros.

Accepted Answer

A) ​decrease; increase. 
B) ​not change; increase. 
C) ​increase; increase. 
D) ​not change; decrease. 
A) ​decrease; increase. 
B) ​not change; increase. 
C) ​increase; increase. 
D) ​not change; decrease.

Question 18

If at current exchange rates it was cheaper to buy a product in country A than country B, the purchasing power parity theory would increase the relative exchange value of country A's currency.

Accepted Answer

A) True 
 B)False

Question 19

If the exchange rate between yen and dollars were 120 yen per dollar, when an American purchases a good valued at 600 yen, its cost in dollars would be:

Accepted Answer

A) ​$5. 
B) ​$600. 
C) ​$72,000. 
D) ​$120. 
A) ​$5. 
B) ​$600. 
C) ​$72,000. 
D) ​$120.

Question 20

The purchasing power parity theory is limited in its applicability by the facts that some goods are not internationally traded and some countries impose tariffs on imported goods.

Accepted Answer

A) True 
 B)False

Exam 21: Financial Markets, Saving, and Investment

The tendency of the prices of identical baskets of goods across countries to converge:

In recent years the United States has run persistent deficits in its balance on the current account.

Which of the following would occur as a result if Europe experienced a lower inflation rate than the U.S.?

Sweden's currency would tend to depreciate if:

Deficits and surpluses in the balance of payments are eliminated by ____ in a pure flexible exchange rate system.

What will happen to a country that fixes the price of foreign exchange below equilibrium?

U.S. imports are considered:

Suppose a video craze in the United States makes a particular Japanese-produced video game very popular. This would tend to:

The difference between the value of a country's merchandise exports and merchandise imports is known as the balance:

A decrease in foreign demand for U.S. exports will ____ the demand for U.S. dollars and cause the U.S. dollar to ____ in value.

Suppose that the dollar value rises from 100 to 125 yen. As a result,

An exchange rate is the price of one currency in terms of a second currency.

If the United States exports military hardware, what is the effect in the exchange market?

Which of the following would increase the demand for U.S. dollars in the foreign exchange market?

It has become largely accepted since the end of the Bretton Woods agreement that:

If European incomes rose, European tariffs on U.S. goods decreased, or their tastes for American goods increased, Europeans would demand ____ U.S. goods, leading them to ____ their supply of euros to obtain the added dollars necessary to make those purchases.

Reduced U.S. tastes for European goods would ____ the supply of euros and ____ the demand for euros.

If at current exchange rates it was cheaper to buy a product in country A than country B, the purchasing power parity theory would increase the relative exchange value of country A's currency.

If the exchange rate between yen and dollars were 120 yen per dollar, when an American purchases a good valued at 600 yen, its cost in dollars would be:

The purchasing power parity theory is limited in its applicability by the facts that some goods are not internationally traded and some countries impose tariffs on imported goods.

The Role and Method of Economics

Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Market in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Filters

A decrease in foreign demand for U.S. exports will the demand for U.S. dollars and cause the U.S. dollar to in value.

If European incomes rose, European tariffs on U.S. goods decreased, or their tastes for American goods increased, Europeans would demand U.S. goods, leading them to their supply of euros to obtain the added dollars necessary to make those purchases.

Reduced U.S. tastes for European goods would the supply of euros and the demand for euros.